Mumbai, Aug 15 () : Gold demand in the second quarter broke the 10-year record to touch 300 tonnes. This comes despite hike in import duties.
The reason is said to be falling prices and the wedding season in India. The World Gold Council says that in the second half the fiscal demand will rise and India gold consumption this fiscal would touch a record 1,000 tonnes. China the second largest buyer of gold will also match up to India.
60% of gold is bought in India and this more or less compensated the 20% drop in prices. The Finance Ministry wants to keep the import of 800 tonnes. The import duty has been raised three times. Yesterday, it banned buying bars and coins. In June, the demand dropped and last month it has picked up.
India’s WGCs say that since the monsoon is good and the crop is expected to be in plenty, the cash-rich farmer would start investing in gold. The demand will peak between October-November as it is a season of festivals and marriages.
Sixty percent of the yellow metal bought in India is lying in rural households. The yellow metal being part of the dowry will increase the buying during marriage season. The first six months, India bought 556 tonnes. This is slightly lesser than China. The last nine quarters in China saw a decline and Chinese are moving towards the metal as a safe haven. The Chinese is also seeing a cash crunch.
The first six months saw the Chinese on a buying spree and this has pushed the prices above the London market. If the two countries were not picking up gold, the prices in Western markets would have further crashed.
Bullion bars, coins and medallions are bought to indulge in speculative trade. Import of bullion raised to 20% and a ban on coins and medallions yesterday was a move to curb this. Domestic importers will have to pay cash and not letter of credit. Unrefined gold will be available to those who export jewellery.